Last month, China’s manufacturing activity contracted for the second consecutive month.

The ongoing Sino-US trade war is also a cause of concern. Chinese oil demand represents over 12 per cent of the total world demand. If China slows down, so would the global crude demand growth.

And while all this is happening, the supply side of the global crude equation continues to appear strong. That is a double whammy to the global crude equation.

In his State of the Union Address, President Trump boasted of the growing American eminence in the world of energy: “We have unleashed a revolution in American energy — the US is now the number one producer of oil and natural gas in the world.

And now, for the first time in 65 years, we are a net exporter of energy,” Trump said.

Trump had a point. The shale revolution in the US has changed the global crude dynamics.

In the long run, too, the scenario is gloomy.

Oil demand growth is set to hit zero within a decade, reports are asserting. Bank of America Merill Lynch (BofAML) sees a peak in global demand for crude oil around 2030, followed by a period of rapid decline.

For the next decade or so, oil demand should continue to grow, although, at a slower rate, the bank underlined.

By 2024, global crude demand growth will halve, falling to just 0.6 million barrels per day (bpd), down from 1.2mbpd this year.

But by 2030, demand growth will zero out as consumption will hit a permanent peak, before falling at a relatively rapid rate thereafter, the report emphasises.

The main driver of destruction in demand is the proliferation of electric vehicles. We are in the midst of the “biggest structural shift in demand growth since the proliferation of the car began in the early 1900s,” the BofAML report has emphasised.

China, the world leader in car sales, has already made a major EV push.

India too is pushing in the EV sector.

“The major driver of structural change in oil demand trends over the next five years and beyond is expected to be electric vehicles,” BofAML said, adding EVs will be having a “meaningful, negative impact” on oil demand from 2021 onwards.

EV sales are growing quickly all around, with the number of EVs on the roads rising rapidly. Automakers are set to roll out dozens of new models, expanding choice and awareness, while also making progress on price, range, and performance.

By 2020, EVs will capture 5pc of global vehicle sales, which will balloon to 40pc by 2030, before rising to 95pc by 2050.

All of that implies a peak in oil demand by 2030.

“EVs are shifting the demand away from gasoline, IMO causes switching into diesel, and strong petrochemical demand growth is shifting demand toward the light part of the barrel, including NGLs in particular,” BofAML wrote.

Opec and its allies are aware of this. In order to meet the growing challenge, leading Opec members including Saudi Arabia and the United Arab Emirates are trying to lock their (non-Opec) allies into a few more years of market coordination, the Wall Street Journal has reported.

They want Russia and other oil-producing nations to continue managing supply for up to three more years. Some of the nations are expected to debate the proposal when they meet in Vienna later this month.

The crude world is in for a massive change and is in the midst of a metamorphosis.

On DawnNews

Comments (2) Closed

junaid

Feb 10, 2019 02:05pm

Main reason isn't even mentioned. It's the strengthening dollar!

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M. Saeed

Feb 10, 2019 09:06pm

Oil discoveries have definitely peaked since last 40 years, as predicted by Jimmy Carter in in his 1977 State of the Union address. It is only the birth of the 'shale revolution' in the US that has changed the global crude dynamics. Good for the world in a short scene, till the renewable energy goals are aggressively followed and met.